Markets take a breather after two weeks of volatility – Focus on US Q2 adv GDP

General trend

- Amid no new political events out of the US, Asian markets finally took a breather after a period of extensive volatility since US equity markets topped out and JPY rapidly strengthened from record lows of ~162 on July 11th (when US CPI for June registered its first negative M/M print since May 2020 and the lowest annual pace since Apr 2021). Then, shortly after the US June CPI release on July 11th, currency markets saw suspected Yen intervention by the BOJ (to be confirmed after July BOJ accounts are released).

- Equities mainly traded flat, but with ASX and Kospi recovering some of their recent losses in mild trading.

- Currencies also traded in a fairly narrow range for a change during the Asian session.

- After China’s PBOC earlier this week cut rates for its 7-day reverse repos, LPR, MLF and SLF (only the RRR rate was not cut), China 1-yr yields fell to as low as 2.17%, the lowest since April 2002.

- Japan’s much-watched Tokyo CPI for July (which comes weeks in advance of the National figures) overall came in slightly below estimates. While Core and Headline figures still exceeded the BOJ’s 2.0% target, Core-core (ex-fresh food and energy) at 1.5% rose at its slowest pace since Aug 2022. [** A reminder that the BOJ's much-anticipated rate decision is July 31st].

- Singapore Central Bank (MAS) left monetary policy unchanged.

- Finally some positive economic news out of New Zealand, with a rise in July Consumer Confidence. Inflation expectations also fell half a percent to 3.7%, the lowest since September 2020.

- US equity FUTs +0.5% to +0.6% during Asian trading.

Looking ahead (Asian time zone)

- Fri 26th (Fri night US Jun Core PCE).

Holidays in Asia this week

- Mon July 22nd Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 7,877.

- New Zealand July ANZ Consumer Confidence: 87.9 v 83.2 prior.

China/Hong Kong

- Hang Seng opens +0.4% at 17,079; Shanghai Composite opens flat at 2,886.

- China 10-year treasury yield -3bps to 2.17%, lowest since April 2002.

- China China State Asset Regulator: Central SOE-enterprises expected to invest CNY3.0T over next five years in large-scale equipment (part of trade-in program) - press.

- China government bond yields likely to decline further, according to analysts; 10-year government bond yield might move below 2.20% – Shanghai Securities News.

- Treasury Sec Yellen: US concerns over China's excess capacity and its threats to workers and firms are shared by many at G20 meetings - Brazilian event [overnight update].

- China reportedly to allocate CNY300B (~$40B) of special bonds in trade-in program; Discloses for the first time amount of funds targeted for an initiative to give a makeover to China's stock of industrial and household equipment – press.

- China PBOC sets Yuan reference rate: 7.1270 v 7.1321 prior (strongest since July 1st).

- China PBOC Open Market Operation (OMO): Sells CNY358.1B in 7-day reverse repos; Net injects CNY299.1B v net drains CNY186.1B prior.

Japan

- Nikkei 225 opens -0.2% at 37,792.

- Japan July Tokyo CPI Y/Y: 2.2% V 2.3%E; CPI (ex-fresh food) Y/Y: 2.2% V 2.2%E.

- Japan sells ¥2.6T VS. ¥2.6T indicated in 2-year JGB bonds; AVG yield: 0.4090% V 0.3780% prior; bid-to-cover: 4.19 V 3.83X prior.

- Japan sells ¥5.2T in 3-Month Bills; Avg Yield: 0.0565% v 0.0192% prior; bid-to-cover: 3.31x v 3.30x prior.

- Japan Outgoing Top FX Diplomat Kanda: Japan told G20 that excessive currency volatility has a negative impact on the economy - Japanese press.

- Japan govt said to expect to achieve primary balance in FY25 - financial press [overnight update].

South Korea

- Kospi opens +0.5% at 2,724.

- South Korea proposes to lower inheritance taxes in the first such revision since 2000 – press [overnight update].

Other Asia

- Indonesia plans to cut China ownership in new nickel projects - FT.

- Singapore Q2 Final URA Private Home Prices Q/Q: 0.9% v 1.1% prelim.

- Singapore central bank (MAS) quarterly monetary policy statement; No change to width and will maintain slope of policy band.

North America

- (US) Jun preliminary Durable Goods Orders: -6.6% V +0.3%E (below all estimates); durables (ex-transportation): 0.5% V 0.2%E.

- (US) Initial jobless claims: 235K V 238KE (moves off 1-year high last week); continuing claims: 1.851M V 1.868ME.

- (US) Q2 advance GDP annualized Q/Q: 2.8% V 2.0%E; personal consumption: 2.3% V 2.0%E.

- (US) Q2 Advance GDP price index: 2.3% V 2.6%E; CORE PCE Q/Q: 2.9% V 2.7%E.

- (US) Weekly EIA natural gas inventories: +22 BCF VS. +16 TO +19 BCF indicated range.

Europe

- (IE) Ireland July Consumer Confidence: 74.9 v 70.5 prior.

- (UK) UK Chancellor of the Exchequer (Fin Min) Reeves to disclose a £19B shortfall in public finances - The Telegraph.

- UK Chancellor of the Exchequer (Fin Min) Reeves: Wants tax burden on working people to be lower, but will not make unfunded comments.

- (UK) July CBI industrial trends total orders: -32 V -20E.

- (EU) ECB’s Nagel (Germany): Reiterates that Council to take meeting-by-meeting approach on policy - comments from G20.

Levels as of 01:20 ET

- Nikkei 225 flat; ASX 200 +0.8%; Hang Seng -0.1%; Shanghai Composite -0.3%; Kospi +0.7%.

- Equity S&P500 FUTs +0.5%; Nasdaq100 FUTs +0.6%, Dax flat; FTSE100 +0.3%.

- EUR 1.0843-1.0861: JPY 153.38-154.12; AUD 0.6535-0.6557; NZD 0.5883-0.5895.

- Gold +0.7% at $2,369/oz; Crude Oil +0.2% at $78.40/brl; Copper +0.3% at $4.1305/lb.